Apple (NASDAQ:AAPL) already has a smart watch product, kind of -- the iPod Nano. Although it's intended as an MP3 player, it is tiny and light enough that many users strap it to their arms to use it as a watch, and there are even third party hacks to add functionality to it. But one thing the Nano lacks is Bluetooth.

That's a problem, because one of the more compelling use cases for a smart watch is to act as a second display for a connected cell phone, allowing you to quickly glance at your wrist whenever you get a text message or alert instead of having to dig around in your pocket.

A smart watch also might be a more natural platform for Apple's digital assistant Siri, and a Bluetooth-enabled watch could take phone calls for the full Dick Tracy communicator watch experience.

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